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Sean Norris
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In other words: If you want your business to succeed, you better know how to manage capital.
Simple Math
Naturally, Vera is telling me about automobiles. "A simple example would be a car purchase," she said. "If you buy a $30,000 car, put down $5,000 and secure a $25,000 loan, then the balance sheet would look like [this]: $30,000 (assets) = $25,000 (debt) + $5,000 (equity)." This is not a non sequitur, and no, we haven't been sidetracked by a mutual interest in the finer points of mid-sized luxury sedans. The car-buying analogy is a small-scale example of the process by which businesses can increase capital: increasing debt, increasing equity or both.
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Sean Norris
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Sean Norris is editor-in-chief for Promo Marketing. Reach him at snorris@napco.com.
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